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Describe the term Days Payable Outstanding.  How is this important to a procurement manager and why is...

Describe the term Days Payable Outstanding.  How is this important to a procurement manager and why is it a major negotiation strategy? (5 points)

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Answer #1

Days Payable Outstanding refers to the number of days it takes for a company to pay back all the accounts payable i.e. bills and invoices.

The longer the Days Payable Outstanding (DPO), the advantageous it is for the company. Longer DPO means the company will have cash in hand for investing in short term business activities or earn interest on it. However, longer DPO comes with credit terms and sometimes they may put the company at a disadvantage for example higher interest cost.

Hence DPO is a negotiation strategy for the procurement team. They try to get longer DPO to better manage the cash for operations.

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